Matthew Merton & Anor v Bank of Queensland Ltd

[2013] HCASL 208

MATTHEW MERTON & ANOR

v

BANK OF QUEENSLAND LTD

[2013] HCASL 208
S108/2013

1. The applicants were directors of Heritage Village Estate Pty Ltd ("HVE").  Around April 2008, HVE applied to the respondent for finance for a redevelopment project which involved the subdivision of land it owned at Castle Hill.  The respondent provided two facilities to HVE:  a commercial rate loan agreement of $2,362,000 ("the Loan Agreement") and a business overdraft agreement of $65,000 ("the Overdraft Agreement").  Security for the facilities included guarantees given by the applicants.  In August 2011, HVE went into liquidation.

2. On 26 September 2008, the respondent advanced $1,070,016.19 under the Loan Agreement.  The respondent advanced no further funds on the ground that HVE had defaulted by failing, contrary to clause 7 of the Loan Agreement, to cause "[s]ubdivision and issue of titles to be confirmed within a maximum of 3 months of initial funding [and] prior to construction funding being made available."  The applicant submitted that the respondent was obliged to advance a further $180,000 to HVE for the costs of subdivision.

3. Stevenson J of the Supreme Court of New South Wales held that HVE failed to comply with clause 7 of the Loan Agreement and was thereby in default.  By operation of the cross-default provisions of the Overdraft Agreement, HVE was also in default under that agreement.  His Honour further held that the applicants, as guarantors, were liable for the indebtedness of HVE to the respondents.

4. The applicants appealed to the Court of Appeal of the Supreme Court of New South Wales.  The central issue in the appeal was whether the respondent was obliged to make advances beyond the initial $1,070,016.19.  Barrett JA (Gleeson JA and Sackville AJA concurring) agreed with Stevenson J that the respondent was not obliged to advance further funds because of HVE's default.  Accordingly, the Court dismissed the appeal, and also a notice of motion seeking an order to admit further evidence.

5. The applicants sought a stay of the orders of the courts below in this Court.  On 24 July 2013, Hayne J dismissed that application and ordered that the costs of the application be the respondent's costs in this application for special leave to appeal.

6. The applicants contend that the Court of Appeal failed properly to construe the Loan Agreement, thereby denying the applicants natural justice.  In relation to the question of construction, the applicants advance similar arguments to those rejected below.  No question of principle arises on these arguments.  There are insufficient reasons to doubt the correctness of the decision of the Court of Appeal.  There is nothing to suggest that the applicants were denied natural justice.  Special leave should be refused. 

7. Pursuant to r 41.10.5 we direct the Registrar to draw up, sign and seal an order dismissing the application with costs.

S.M. Kiefel
13 December 2013 P.A. Keane